perfect competition is said to be occurred where there are large
number of buyers and seller of a homogeneous produce and the price
of the product is determined by the industry. there is one price
that prevails in the market all firms sell the product at the
prevailing price.
Main conditions are as follows.:
- Large number of buyers and seller exist in the perfect
competition. : Many buyers are available to buy the
product, and many sellers are available to sell the product.
- Producers sell homogeneous product to buyers:
firms produce identical products.
- There is absence of artificial restrictions.
No government interventions and no price and product control.
- Free entry and exit of firms are considered.
firms may enter and exit from the market any time
- Perfect knowledge about the market. both
seller and buyer have information about the market and its
conditions. buyer and seller both have perfect information about
price.
- Perfect mobility of factors of production is noticed
: factors of production can move to industry where they
find more wages and remuneration.
- Firms are price taker and sell the product at price
decided by the industry. Firms are restricted to sell the
product at price decided by the industry, they can not increase or
decrease the price itself.
- Non existence of transportation cost. As
uniform price prevails through out the market. so no transportation
cost will exist in the market as buyer will not go far away to
purchase the goods.